Taxation, Information Acquisition, and Trade in Decentralized Markets: Theory and Test

Tri Vi Dang (), Xiaoxi Liu and Florian Morath

Working Papers from Faculty of Economics and Statistics, Universität Innsbruck

Abstract: This paper shows that a transaction tax makes trades in decentralized markets more information sensitive and enlarges the range of information costs for which the equilibrium exhibits private information acquisition and endogenous adverse selection. A transaction tax reduces the probability of trade. The opposite implications hold for a tax on capital gains. The theoretical implications of a transaction tax are tested using a tax policy change in one segment of Singapore’s housing market. Using various proxies for information sensitivity, the triple difference-in-difference analysis shows that a higher transaction tax reduces turnover more strongly when trades are more information sensitive.

Keywords: Bargaining; information acquisition; taxation; transaction tax; capital gains tax; tax incidence; decentralized markets; housing markets; policy experiment; information sensitivity (search for similar items in EconPapers)
JEL-codes: C78 D82 D83 G18 H20 (search for similar items in EconPapers)
Pages: 58
Date: 2022-08
New Economics Papers: this item is included in nep-acc, nep-gth, nep-pbe and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www2.uibk.ac.at/downloads/c9821000/wpaper/2022-08.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2022-08

Access Statistics for this paper

More papers in Working Papers from Faculty of Economics and Statistics, Universität Innsbruck Contact information at EDIRC.
Bibliographic data for series maintained by Judith Courian ( this e-mail address is bad, please contact ).